Boutiques vs. Bulge Bracket, Part I
“I work for a boutique investment bank,” responded Todd cockily, smirking and now pulling up his pants over his temporarily retreated beer-gut, illustrating that this was one of those hardcore New York male-anorexia and exercise weeks. He would be spilling out of pants next week no problem after this weekend’s depression-gorge.
Todd paused and collected himself. “Yeah, I mean, I just really wanted to be closer to the deals, you know. Get more exposure.”
-The Boutique, Leveraged Sellout
When most people out there decide they really want to do investment banking, they usually go for the big names first: Goldman Sachs, Morgan Stanley, even UBS LA.
But occasionally someone asks me about the boutiques out there, whether they’re referring to the “top” ones like Evercore and Lazard, middle-market banks, or true regional boutiques that just have 1 or 2 offices.
Going to a top name is just not an option for everyone. If market conditions are bad, if you have no previous finance experience, or if you are trying to switch into investment banking from engineering or law or other fields, you might have to go with a boutique.
But are there any cases where a boutique would actually be preferable to a bulge bracket? Should someone actually want to go to one?
The Main Difference Between A Bulge Bracket And A Boutique
People most commonly cite the size of deals as the difference. While Goldman Sachs may advise on multi-billion dollar acquisitions, a boutique will usually stick to deals under a billion dollars and often far less than that. In the world of corporate finance, $50 million is chump change.
Other commonly cited differences are working in smaller groups, getting more responsibility, and being more than just a “number-cruncher” at a boutique.
While these can be true sometimes, the main difference at the Analyst level is that your boutique experience will be much more random.
Fooled By Randomness
Make no mistake: you can get tremendous experience at a boutique and learn more about actual deals than you might at a bulge bracket. But you might also spend all your time creating pitchbooks and doing useless work if the senior bankers can’t make rain.
I’ve seen both scenarios. One friend at a boutique basically learned the entire job in 3 months because he was effectively running a deal by himself.
Another friend spent most of his time making pitchbooks, making coffee (no administrative staff, thank you very much) and did deals that were so small he never learned much.
Don’t assume that you will get a “better experience.” Your chances of getting good deals to work on and having good exit opportunities are much higher at a bulge bracket.
Ok, But Is It The End Of The World If I’m Working At A Boutique?
No. But if you do go that route, you should very carefully investigate the work environment, dealflow, and everything else before you jump into it blindly. To get a more accurate view, try speaking with Analysts and Associates rather than higher-ups.
No matter how much diligence you do, however, the sad fact is that there will be time lag between when you interview and when you start, and a lot can change in a year… or even a few months.
Even at a great bulge bracket office like UBS LA, the departure of a few “stars” caused much havoc, and the effect is only more pronounced at a much smaller investment bank.
Still, you should do your homework as much as possible.
But Still, Is There Any Reason I Would Want To Work At A Smaller Bank?
I strongly recommend that you spread your net wide and consider all your options. Unless you have some kind of personal connection at a boutique, though, there is little reason to prefer it to a big name bank.
Lifestyle is typically not much better. Yes, sometimes there are one-off cases of Analysts only working 60 hours a week… at certain offices. But at the “top” names like Evercore, investment banking analysts work bulge bracket hours. And once you get up to around 80 hours a week, there’s honestly not much difference between 80 vs. 90 anyway.
You will have exit opportunities, but you are more limited because certain firms always go to bulge brackets first, so Analysts there will get preferential treatment.
At top boutiques and middle-market banks, the pay will be comparable to bulge brackets, but at smaller regional places, it can actually be significantly less… as in, 50% less in some cases.
The only situation where you might want to pick a boutique instead is if you have offers from multiple banks, are reasonably confident the boutique will give you good work, and just like the people or work environment a lot more after thorough investigation. Your team is important, and great experience is not worth it if you want to shoot yourself repeatedly because you hate your co-workers.
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Tags: boutique investment banks, bulge bracket, investment banking, investment banking analyst, investment banking exit opportunities, middle-market
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The more you write about UBS LA, the more I regret not applying there (I applied to the UBS tech group in SF and didn’t want to apply to multiple locations within a bank).
How do you feel about applying to multiple divisions/locations to a particular bank?
The UBS Tech group in SF is much better than LA, at least lifestyle wise.
Applying to multiple divisions/locations is generally fine, but I would not apply to multiple locations of the same division, e.g. NY and SF for one group. Really depends on the bank, though, some make a big deal over it and some don’t.
Where would Barclays capital fall, I’m working for them this summer, and am not sure which group is better and which is not. what do you think the exit opportunites would look like there? I keep hearing mixed things and don’t really know to to interpret it all. Also, you say “networking” but how do you really start networking whne you don’t know what to ask, what to put in an e-mail without coming off wanting a job?
Hi lori,
Barclay’s is an interesting case. It’s not very well-known for investment banking but highly regarded for trading and some other areas. I think it would probably be comparable to middle-market banks in terms of exit opportunities.
As far as networking, I would just be yourself and say you’re curious and interested in the industry. Anyone working there will know you’re looking for a job, so I wouldn’t try to hide it. Just ask about their career paths, personal experiences, what they like/don’t like, etc.
Hope this helps!
I got out of school a year and a half ago (undergrad), and have been working for a rather large financial advisory practice in Orange County, CA. I am leaving the firm to pursue a career in ibanking. Since I did not go to a top university and have no experience in the banking industry, I’m thinking the boutiques are my only option. Is this an accurate assumption? I have a BS in Finance and have had much relevant experience in equity and debt valuations. I am also currently taking an ibanking training course. Do you have any thoughts or suggestions? Thanks
Akash: if the economy were better, you would have somewhat of a shot at bulge brackets. With things the way they are though, tons of people are getting fired at every level and at firms of different sizes currently… making it hard to get in anywhere at the moment.
Without any banking experience or a top university degree, I would agree that boutiques are your best shot currently. If you had a great connection at a bulge bracket that could help you get in, but otherwise I would focus on getting into boutiques.
Based on this article, are you implying that working for a “top” boutique is better? Would you take Lazard/Evercore over GS/MS/Mer? I, like you, have heard of the great exit opportunities at Lazard and Evercore
Mike: I would put Lazard/Evercore in the same “class” as GS or MS or any other bulge bracket. I don’t think they’re better or worse, just equally prestigious.
Whether or not I would take one of those over a bulge bracket would depend on the group and people more than anything else.
hi
i’ve been reading your post above, very interesting about the exit opps. how hard is it for someone from boutiques like evercore, greenshill, lazard to move on to private equity house?
also what are the chances of moving from boutique to bulge bracket from say, analyst/associate position?
Not hard at all in either case.